Cascade Valley, PeaceHealth merger collapses

ARLINGTON — It was nearly a year ago that Cascade Valley Hospital, the last independent hospital in Snohomish County, announced plans to join up with PeaceHealth, a Catholic health care organization.

The move was part of a trend seen both locally and nationally of smaller health care organizations joining up with larger ones with the goal of providing more services at better costs.

The proposed deal has now unraveled, with PeaceHealth saying it had to back out. Cascade Valley is now free to consider other options.

“I can’t tell you how disappointed I am about this,” said Nancy Steiger, chief executive for PeaceHealth’s Northwest Network. An agreement was nearly completed with Cascade Valley when PeaceHealth ran into financial problems caused by the conversion to electronic medical records, she said.

She said she didn’t know the exact cost to make the switch but it would be in the hundreds of millions of dollars.

PeaceHealth has hospitals and medical clinics in Alaska, Oregon and Washington, including St. Joseph Medical Center in Bellingham.

There were other problems as well. PeaceHealth would have had to find a way to electronically hook up not only the electronic medical records at the Arlington hospital, but also other systems such financial reporting and human resources reports, Steiger said.

Clark Jones, Cascade’s chief executive, said PeaceHealth told the hospital that it could now take up to two years before the organization could make a commitment to the hospital.

Jones said he first sensed that there may be problems completing the deal about two months ago. Last week, PeaceHealth told the hospital that they weren’t going to be able to wrap up the agreement.

The Arlington hospital then asked to be taken out of its previous agreement to discuss a deal exclusively with PeaceHealth, he said.

Jones said he expects the board to schedule a work session to discuss the hospital’s next steps.

The hospital, which has 450 full- and part-time employees, has an operating budget of $43 million. Last year, it had an operating loss of nearly $3 million, Jones said.

This year, he said he expects the hospital will operate in the black.

Cascade Valley is a tax-supported public hospital. In August 2013, its five elected board members voted unanimously to pursue a deal with PeaceHealth.

The decision came despite some public opposition to the tax-supported hospital affiliating with a Catholic health care organization, due to the church’s opposition to birth control, abortion and assisted suicide for those who are terminally ill.

State Attorney General Bob Ferguson issued a formal opinion last year saying that tax-supported hospitals have to provide access to birth control and abortion services.

Steiger said those issues had zero affect on trying to complete a deal with Cascade Valley.

It was simply that her organization didn’t have the financial resources available to bring the two organizations’ electronic record keeping systems together.

Cascade Valley wasn’t the only health care organization considering joining up with PeaceHealth. PeaceHealth also had talked with Skagit Regional Health, which operates a public hospital in Mount Vernon and medical clinics.

Skagit will consider other options as well, but will continue talks with PeaceHealth about an agreement on cardiovascular services.